You would have thought that, after it has been plugged so intensively over the past few years, the concept of “Active Asset Management” would now be well understood. Everyone knows that property performance needs to be understood and how to do that, don’t they? Well yes and no. Understandably, everyone’s view is affected by the context of their own organisation and the approach that has been taken. The result is that focus may be on different areas of assessment.
Some are driven purely by financial performance, by which I mean the result of Net Present Value calculations, others have developed complex points scoring systems and rely on those instead of the pure calculated approach.
Some are using yield as a way of isolating properties requiring detailed assessment and others either just don’t or don’t have the property valuation data on which to base the calculation. The HCA Governance and Financial Viability Standard Code of Practice requirements for testing business plan assumptions and sensitivities are a challenge which can be difficult to accommodate when it comes to outcome modelling.
Organisations also tend to have different starting points for appraisals and this has coloured their approach. The most common ways into a data-based approach have been:
These have their own pros and cons and, as always, there is a balance to be struck between ease of use on one hand and flexibility to handle all scenarios on the other. Some require a huge amount of data preparation before it is loaded into the model and others can automate some of that or integrate with the sources of that data.
So without going into a huge amount of detail, I believe that the starting point should not be “How can I load all my data in and will it tell me which properties are performing badly?” but, instead, should be “Can my model deliver all the outcomes and functionality I require?”. In my opinion, the outcomes and functionality that an appraisal/modelling system should deliver are:
When it comes to choosing your IT solutions for this challenge, as ever you have many choices. There are a number of consultancies who have developed standalone solutions; alternatively you can look to your core suppliers to see if they’re able to provide a joined up, strategic response to the challenge. After all, their systems already contain the properties, planned maintenance costs, rent details etc. and this will avoid the risk of data errors and corruption that spreadsheets bring.
John Buckland, head of asset management, Orchard